Insurers selling fixed-indemnity plans claimed a victory July 1 when the United States Court of Appeals ruled the Department of Health and Human Services went beyond its authority in issuing a rule that effectively barred them selling the plans as an alternative to Obamacare.
The case was brought to the Court of Appeals for the District of Columbia by insurers, such as lead plaintiff Central United Life Insurance Co., which sold fixed-indemnity plans.
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The decision means insurers may sell health plans that do not meet the stringent rules of the Affordable Care Act.
A fixed-indemnity plan pays a pre-determined amount on a per-period or per-incident basis, regardless of the total charges incurred, according to healthinsurance.org. Plans might pay $200 upon hospital admission, or $100 per day.
Individuals found the plans cost effective, even after paying the penalty under the ACA for foregoing minimum essential coverage.
HHS said consumers could buy fixed-indemnity insurance thinking they were getting comprehensive coverage, when in fact, they were not protected against major medical expenses.
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Four years after ACA passage, HHS ruled that to maintain minimum essential coverage, fixed-indemnity insurance be treated as an excepted benefit, becoming a supplement for a high-deductible plan, but not as a substitute for health coverage.
However, the appeals court said the Affordable Care Act did not eliminate fixed-indemnity insurance.
HHS amended the law, "fatally so," the ruling said. "Disagreeing with Congress's expressly codified policy choices isn't a luxury administrative agencies enjoy."
HHS lacked the authority to demand more of fixed-indemnity providers than Congress required, the ruling said.
Twitter: @SusanJMorse